Bank fees on current accounts have fallen by double digits in the past two years as a result of the Bank of Israel's bank fees reform. Credit card fees have also fallen as competition between banks for households has intensified, according to a Bank of Israel report, published today to mark two years since the widely criticized reform was launched in the summer of 2008.
The Bank of Israel says that bank fees fell by an average of 13% in the first two years of the reform, and that credit card fees fell by an average of 20%. "The downward trend was seen at all five large banks and at the credit card companies," said the Bank of Israel.
Spending by households on a basket of common current account services (including overdrafts) fell by 13% in real terms and by 6.8% in nominal terms in two years, from NIS 16.34 per month when the reform came into effect to NIS 13.22 per month in the third quarter of 2010. Among the five large banks, Bank Hapoalim (TASE: POLI) charged the lowest current account fees (NIS 14.52 per month), and First International Bank of Israel (TASE: FTIN) charged the highest fees (NIS 20.11 per month).
However, if one looks beyond the big banks, First International Bank subsidiary Bank Yahav for Government Employees Ltd. is cheaper by a "substantial margin" than the other banks.
The Bank of Israel says that Bank Hapoalim subsidiary Isracard Ltd. charges the lowest average fee on credit cards, and that Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa), owned by Discound Bank and First International Bank, charges the highest fees. The average monthly fee at Isracard is NIS 3.95, compared with NIS 10.36 at ICC and NIS 7.11 at Leumi Card Ltd..
First International Bank said in response, "First International Bank had the sharpest drop (17%) in fees for households since the Payment Systems Law (5768-. 2008) came into effect, whereas prices at the big banks actually rose. First International Bank is the cheapest bank for sections of the population, such as young people, soldiers, students, and pensioners."
Sharp criticism was directed at the Banking Supervision Department when the bank fees reform came into effect in 2008. The critics said that the reform applied to only a small number of fees, and that the banks would find ways to compensate themselves for any losses incurred, resulting in actual harm to customers.
First International Bank today partly reiterated this criticism, saying, "The comparison gives a very partial picture. We're talking about a very limited number of fees, which account for a very small number of bank account management fees. Interest spreads on loans, on overdrafts, and on deposits are a much more important expense, and are not reflected in the comparison. First International Bank has a competitive edge here, as well as in many other fees."
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2011
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